Creative industries in New Zealand

Transcription

1 Creative industries in New Zealand Economic contribution Report to Industry New Zealand March 2002 NZ INSTITUTE OF ECONOMIC RESEARCH (INC.) 8 Halswell St. Thorndon P O BOX 3479 WELLINGTON Tel: (04) Fax: (04) The Institute, its contributors, employees and Board shall not be liable for any loss or damage sustained by any person relying on this report, whatever the cause of such loss or damage.

2 Preface The New Zealand Institute of Economic Research (NZIER), based in Wellington, was founded in 1958 as a non-profit making trust to provide economic research and consultancy services. Best known for its long-established Quarterly Survey of Business Opinion and forecasting publications, Quarterly Predictions and the annual Industry Outlook with five-yearly projections for 25 sectors, the Institute also undertakes a wide range of consultancy activities for government and private organisations. It obtains most of its income from research contracts obtained in a competitive market and trades on its reputation for delivering quality analysis in the right form, and at the right time, for its clients. Quality assurance is provided on the Institute s work: by the interaction of team members on individual projects; by exposure of the team s work to the critical review of a broader range of Institute staff members at internal seminars; by providing for peer review at various stages through a project by a senior staff member otherwise disinterested in the project; and sometimes by external peer reviewers at the request of a client, although this usually entails additional cost. Authorship This report has been prepared at NZIER by Mark Walton and Ian Duncan, and reviewed by John Yeabsley. The assistance of Robert Arlidge, Industry New Zealand is gratefully acknowledged. We are also indebted to executives of the industry bodies mentioned in the report, and others, who provided information and general guidance. NZIER Creative industries in New Zealand ii

3 EXECUTIVE SUMMARY Highlights This report sets out NZIER s initial estimates of the contribution of the New Zealand creative sector to the New Zealand economy. Our figures put GDP in the creative sector for the year to March 2001 at about 3.1% of the New Zealand total. The GDP contribution for the creative sector is comparable with that for: communication services (3.2%), central government administration and defence (3.3%), finance (3.5%), and education (3.9%). The creative sector GDP and employment shares estimated for the 2001 March year are higher than for the year to March 1997 i.e. the sector appears to have been grown faster than the economy as a whole over that period. The contribution estimate is close to those obtained in earlier New Zealand studies of the copyright industries and a recent Australian study of the creative sector in that country. The estimated GDP share for New Zealand is significantly below the estimate of over 5% for the UK. The difference can partly be explained by the greater maturity; and thus higher relative importance of such industries in the UK, than in New Zealand. In particular the UK is a major net exporter of such services as advertising, design, software, and publishing services, whereas New Zealand is probably a net importer of creative services overall. This in itself would explain some of the differences in economic contribution shares between the two countries. Another contributing factors might be some definitional and measurement differences in the data used for the two countries. For the New Zealand study, we have based the analysis of the creative sector on the definitions used in the UK Mapping Study. But, for obvious reasons, we have also tried to link our industry definitions and estimates where possible to official statistics, that is, via an industrial classification coding system (ANZSIC). This means that the concordance between the industries covered in the New Zealand study, and the corresponding industries in the UK study, will not always be exact. Estimated apparent domestic consumption of creative sector outputs in New Zealand was $7-7.5 billion in the year to March This report is intended to establish a robust basis for further refinement in the future, for example, as more extensive primary information becomes available. The results so far are subject to a number of health warnings as follow. Caveats The information base on which the New Zealand estimates are based is very poor for some industries, for which there is no comprehensive data collection. Some industry studies have been completed recently, and they have been very helpful in filling some of the gaps. But overall, there is scope for both double counting and under/or overestimation of data for most industries. Hence, our results can only be taken as indicative of the range in which results based on more comprehensively collected data would fall. NZIER Creative industries in New Zealand iii

4 We have endeavoured to be as clear as possible about the basis of the figures, but should stress that: Although we based the industry definitions on ANZSIC codes (and the UK study) there is still some fuzziness about industry boundaries within the sector. In the case of most of the industries we have only one or two revenue figures (e.g. for the latest year or two). We have backcast the figures to generate time series without any firm basis for the trends assumed. However, we have tried to reconcile our sector figures for the initial year (1996/97) with results of other studies or sources. The latest revenue figure for each industry is not necessarily a good indicator of future levels. Feature film production activity, for example, is inherently volatile, and could decline in forthcoming years. With the exception of a few sectors where the major participants publish income and expenditure figures, we have no direct observations of intermediate consumption. Hence, in some cases, we have had to assume intermediate input/revenue ratios to arrive at value added figures. In contrast to the recent Australian study, and previous New Zealand studies, this study has not attempted to delineate between copyright and non-copyright goods. NZIER Creative industries in New Zealand iv

5 CONTENTS Highlights...iii Caveats...iii 1. Introduction The UK report Industry coverage Research Approach Overview Industry definitions Condensed industry list Data Capture Economic contributions by industry Overview Advertising Primary activities Discussion Economic contribution Supplementary data Software and computer services Discussion Economic contribution Supplementary data Publishing Discussion Economic contribution Television and radio Discussion Economic contribution Supplementary data Film and video production Discussion Economic contribution Supplementary data Architecture Discussion Economic contribution NZIER Creative industries in New Zealand v h:\my documents\content loading\nzier-mapping-ci.doc

6 4.7.3 Supplementary data Design Discussion Economic contribution Designer Fashion Primary activities Data Music and performing arts Primary activities Discussion Economic contribution Visual arts and crafts Primary activities Discussion Economic contribution Creative sector totals Economic contribution Benchmarking External trade International trade in services Spending by tourists Expenditure on creative industries Sources APPENDICES Appendix A: Statistical mapping Appendix B: Pro-Forma Questionnaire Appendix C: Design revenue NZIER Creative industries in New Zealand vi h:\my documents\content loading\nzier-mapping-ci.doc

7 TABLES Table 1: Advertising estimated economic contribution... 7 Table 2: Advertising supplementary data... 7 Table 3: Software and computer services estimated economic contribution... 9 Table 4: Software and computer services supplementary data Table 5: Publishing estimated economic contribution Table 6: Television and radio estimated economic contribution Table 7: Motion picture, radio and television services supplementary data Table 8: Screen production estimated economic contribution Table 9: Architecture estimated economic contribution Table 10: Architecture and engineering services supplementary data Table 11: Design Estimated economic contribution Table 12: Music and performing arts estimated economic contribution Table 13: Visual arts and crafts estimated economic contribution Table 14: Creative industries economic contribution Table 15: External trade in selected services-$m June year Table 16: Household expenditure on cultural goods 1995/ Table 17: Design categories NZIER Creative industries in New Zealand vii h:\my documents\content loading\nzier-mapping-ci.doc

8 1. INTRODUCTION Industry New Zealand commissioned NZIER to prepare a report on the economic contribution of Creative Industries in this country. Our brief for the report was that it: Be as robust as possible given deficiencies in primary information; Use the same definitions as used in the UK Creative Industries Mapping Document Cover gross revenue, contribution to GDP, imports, exports, and employment for each industry. Include a section on growth rates. The structure of the report is as follows: Section 2: The UK mapping study Section 3: Our research process Section 4: Economic contributions by industry Section 5: Benchmarking Section 6: External trade Section 7: Expenditure on creative industries Section 8: Sources Appendix A: Statistical mapping Appendix B: Survey form Appendix C: Design revenue 2. THE UK REPORT For the purposes of our review, the main relevant aspects of the UK study are: Industry coverage used Methodology and data focus 2.1 Industry coverage The 2001 study in the UK, retains the original definition of the creative industries: those industries which have their origin in individual creativity, skill and talent and which have a potential for wealth and job creation through the generation and exploitation of intellectual property. The industry coverage for the UK study is: Advertising Architecture Art & Antiques Market Crafts NZIER Creative industries in New Zealand 1

9 Design Designer Fashion Film and Video Interactive Leisure Software Music Performing Arts Publishing Software & Computer Services Television & Radio Data focus is on production (i.e. the output of UK s creative industries) rather than expenditure (i.e. the amount spent by the UK regardless of country of origin). Data estimated in the study includes: Core activities Industry revenues UK market size External trade Employment Industry structure: number and size breakdown of businesses, possibly by further (sub-industry) breakdown Regional dimensions: geographic distribution 3. RESEARCH APPROACH 3.1 Overview The central focus of this New Zealand study is to generate soundly-based estimates of contributions to GDP for individual creative industries and then for the creative sector (as defined in the UK study) as a whole. Availability of relevant data ranges from fairly comprehensive data for some industries, to very little for others. Hence, results generated here for the creative sector as a whole involve a significant degree of estimation. GDP in aggregate can be measured in three ways production, expenditure or income approaches. In this context, where the focus is mainly on production of individual industries, and then building this up to an aggregate sectoral picture, the production approach is appropriate. This involves estimating annual revenue for each industry and then deducting intermediate consumption (inputs of goods and services purchased from other industries, including imports). The difference is the value added or product of each industry. The challenge in the case of narrowly defined industries such as these, is the paucity of official data. This is limited in most cases to employment data it is not feasible for Statistics New Zealand to undertake economic censuses of thousands of separate industries, in order to gather revenue and expenditure data for them. NZIER Creative industries in New Zealand 2

10 The essence of the approach is to simulate SNZ production of national accounts and related official economic data. The approach, at this very fine level of industry disaggregation, draws on: Existing official surveys that provide data for the listed industries. These includes business demographics data on employment; inter-industry transactions data; surveys of cultural statistics and household spending on culture; and the annual information technology survey. Primary data or estimates by industry associations, quasi-government, and government agencies, or independent researchers where possible obtaining current snapshots and data for earlier periods. Building bottom-up aggregates for the required industries, using appropriate weightings, and adjusting as required for both possible double counting, and gaps in coverage. Using various checks e.g. value added to GDP, employment: output ratios, to check the apparent robustness of the estimates. The UK mapping project faced the same data challenges, and adopted broadly the same research process. 3.2 Industry definitions The UK Mapping Document does not appear to use any underlying statistical classification in its definition of creative industries. We decided it would be prudent for us to do so - for reasons of comparability with national accounts, consistency across time, and transparency. It seemed sensible to use the ANZSIC classification for definition; as far as possible. This approach does not completely solve the definition problems because there is not always an exact concordance between the descriptions used in the ANZSIC code and the industry descriptions used elsewhere. Even at the finest SNZ working-level of the ANZSIC classification (i.e., 6-digit) some of the creative industries are buried. Take fashion design as an example: fashion design is lumped with a raft of other activities including telephone answering services, collection agencies, and translators in a business services nec category (L786900). Given that many of New Zealand s fashion houses are likely to combine elements of design and manufacture, this gives an idea of the difficulty associated with trying to define very specific industries in what is essentially a classification with a broader focus. The creative industries for which ANZSIC definition is particularly problematic are: Designer fashion, crafts and art and antique markets, in addition, separating interactive leisure software from software and computer services proved to be problematic. While there are definitional problems relating to the smaller of the creative industries, the ANZSIC coverage of most of them including the significant ones in the New Zealand context - is relatively clear. The mapping definitions we have adopted are set out in Appendix A. NZIER Creative industries in New Zealand 3

11 3.3 Condensed industry list Because of the difficulty of defining some industries, and thus obtaining meaningful data, we have condensed the number of industries analysed to 10, compared to 13 in the UK study. The 10 are: 1. Advertising 2. Software & Computer Services (including Interactive Leisure Software) 3. Publishing 4. Television & Radio 5. Film and Video 6. Architecture 7. Design 8. Designer fashion 9. Music and Performing Arts 10. Visual arts (arts, crafts, antiques) 3.4 Data Capture We used a brief pro forma questionnaire (refer Appendix B) as a vehicle for indicating to industry sources the wish list of data we would like to gather, and for capturing consistent data across each of the industries. The questionnaire distributed was designed to focus on: revenue/market size employment expense and value added exports and imports industry structure regional dimensions secondary economic impacts A sample questionnaire is attached as Appendix B. 4. ECONOMIC CONTRIBUTIONS BY INDUSTRY 4.1 Overview In this section we set out estimates of economic contribution (value added) for each of the 10 creative industries, together with employment data. For each industry we set out: A list of primary activities in the industry A brief discussion of source material A table setting out the estimated economic statistics. For some industries, we have included supplementary tables of Inter-Industry data. The data in these tables is for industries which overlap with more than one of the 10 creative industries as defined for our analysis. It is included because it provides a NZIER Creative industries in New Zealand 4

12 cross-check on our estimates, and a more detailed picture of market size and demand and supply, including exports and imports. NZIER Creative industries in New Zealand 5

13 4.2 Advertising Primary activities Includes: Agency services Advertising space selling (on a commission or fee basis) Placement services Aerial advertising services Preparation services Sample distribution service Advertising service (except sale of advertising space in own publications or broadcasts) Discussion The main source of industry turnover data is the Communications Agencies Association (CAANZ) website. This sets out annual data by media type, cash advertising revenue, inclusive of commission when sold via agencies. The critical point is that these turnover figures are not the income of the advertising industry, but of the various media e.g. newspapers, magazines, TV, radio etc. Examples of income for the advertising industry are: commissions for placement retainers one-off design assignments The advertising industry only represents part of the total advertising market. For TV advertising, about 90% would be commissioned through CAANZ members. For radio, about 20% by value would be through CAANZ members, and 80% would be purchased by retailers through sales representatives working for radio broadcasters. For newspapers, display advertisements are usually through advertising agencies. Classifieds (cars, real estate) would account for a larger part of their revenue than display advertisements (which are organised by agencies). NZIER Creative industries in New Zealand 6

14 4.2.3 Economic contribution The following table provides summary data and sources. Table 1: Advertising estimated economic contribution 1996/ / / / /01 Revenue ($m) Intermediate consumption Value added Employment (est) Geographic units Memo items: Value added/turnover Value added/fte ($000) Advertising industry turnover Billings to turnover (%) 14% 14% 14% 14% 14% Employment (SNZ) Notes: (1) Revenue assumes CAANZ figure of $150m represents about 75% of industry total (2) Employment figures estimated. Industry view was that SNZ employment figures for this industry are overstated. Source: CAANZ/Statistics New Zealand Business Patterns Supplementary data The following table provides supplementary economic data and sources. Note that this comprises both advertising and marketing. Table 2: Advertising supplementary data Size of market 1996 ($m) Product Total supply Exports Imports Advertising and marketing Industry linkages 1996 Supplying industry ($m) Publishing and recorded media manufacturing 141 Advertising and marketing services 1364 Motion picture, radio and TV services 373 Other NZ suppliers 238 Imports 483 Total supply 2599 Using industry Wholesale trade 575 Retail trade 349 Motion picture, radio and television services 205 Other NZ users 1408 Exports 62 Total use 2599 NZIER Creative industries in New Zealand 7

15 Source: Inter-Industry Study 1996, SNZ 4.3 Software and computer services Computer consultancy service Computer programming service Software production service (other than mass production) Systems analysis service Discussion Main information sources are the SNZ Information Technology Survey and the Ministry of Economic Development Infotech website. Note that the bulk of application software is imported, and there is no obvious way of estimating how much in-house software development takes place. Hence, the bias here may be towards an underestimation of the true economic contribution of the creative part of this industry. The estimates are intended to include Interactive leisure software i.e. designing interactive games and writing software for them. Although this may be a sector with considerable growth potential, currently in New Zealand this is an infant industry with 8-9 small companies, of which Sidhe is the biggest with about 19 employees. Total employment may thus be only about 100 full-time equivalents. Financial backing for these companies is mainly provided by software publishing houses (US, Europe, Japan) who have first claim on royalties once a game is released. NZIER Creative industries in New Zealand 8

16 4.3.2 Economic contribution Table 3: Software and computer services estimated economic contribution 1996/ / / / /01 Revenue ($m) Intermediate consumption Value added Employment Geographic units Memo items: Value added/turnover Value added/fte ($000) Software exports ($m) Sources: SNZ IT Survey/SNZ BD Notes: (1) Revenue taken from SNZ IT Survey categories software sales plus computer services (2) Value of in-house software development across New Zealand industry as a whole is unknown (3) Value/added to turnover ratio assumed to be constant Source: SNZ Information Technology Survey/SNZ Business Patterns/ Games New Zealand/Industry New Zealand Supplementary data The following table provides supplementary economic data and sources. NZIER Creative industries in New Zealand 9

17 Table 4: Software and computer services supplementary data Size of market 1996 ($m) Product Total supply Exports Imports Computer software and services Industry linkages 1996 Supplying industry ($m) Wholesale trade 236 Communication services 41 Computer services 1017 Other NZ suppliers 324 Imports 187 Total supply 1805 Using industry Wholesale trade 257 Retail trade 57 Finance 255 Computer services 98 Central government administration 148 Gross fixed capital formation 322 Other NZ users 623 Exports 45 Total use 1805 Source: Inter-Industry Study 1996, SNZ NZIER Creative industries in New Zealand 10

18 4.4 Publishing Newspaper printing or publishing Other periodical publishing Book and other publishing Recorded media manufacturing and publishing Discussion A potential overlap arises from the last of the above-listed activities which includes music. In other words, some so-called copyright activities are not well distinguished in the official statistics. The challenge, as for other industries, is to distinguish between physical items sold and intellectual property content, which is the aspect relevant to the creative sector. In addition to the Copyright Council, the main industry bodies are the New Zealand Press Association, and Book Publishers Association (BPANZ) although the latter does not have complete coverage of book publishing Economic contribution The following table provides summary data and sources. Table 5: Publishing estimated economic contribution 1996/ / / / /01 Revenue ($m) Intermediate consumption Value added Employment Geographic units Memo items: Value added/turnover Value added/fte ($000) Sources: New Zealand Press Association/Book Publishers Assn/SNZ BD/CAANZ/Annual Reports Notes: (1) Main revenue sources are newspaper and magazine sales advertising (2) Also includes BPANZ revenue estimate for 2000/2001 (3) Value added/turnover ratio estimated from GST Business Activity Indicator Source: New Zealand Press Association/ Annual Reports Wilson and Horton and INL/CAANZ/BPANZ/Copyright Council/SNZ Business Patterns. 4.5 Television and radio Organisations mainly involved in television or radio broadcasting. Includes the production of programmes, and the collection of news for broadcasting. NZIER Creative industries in New Zealand 11

19 4.5.1 Discussion Revenue data and expenses have been derived from annual reports of main companies involved in these activities i.e. TVNZ, Canwest, and Sky Television. In addition to these are Prime TV and West Media. The major revenue source in television and radio, as for newspapers and magazines, is advertising. The major creative component of the television industry is production of programme material. With the exception of news, current affairs, and sport, this is all covered in the SPADA survey, including detailed information on financing sources. This is an input into the broadcasting industry, but an output of screen production, as discussed in the following section. Some of this production work is undertaken by the broadcasters, and some by independent production houses. We have deducted from the TVNZ revenue figure for 2000/2001 the amount of $143 million which covers transmission and broadcasting services delivered mainly by BCL, and is outside the creative sector as defined in this report. Similar adjustments apply to earlier years. The main information source for commercial radio is the Radio Broadcasters Association. Radio New Zealand data from the Company s annual report is also included Economic contribution The following table provides summary data and sources. Table 6: Television and radio estimated economic contribution 1996/ / / / /01 Revenue ($m) Intermediate consumption Value added Employment Geographic units Memo items: Value added/turnover Value added/fte ($000) Notes: (1) Last two years from annual reports; first three years estimated (2) Intermediate consumption estimated from accounting data (3) Television figures adjusted to exclude transmission revenues. Sources: Television Broadcasters Association/ Radio Broadcasters Association/ Annual Reports/ CAANZ/SNZ Business Activity 2 Radio New Zealand is a Crown entity in terms of the Public Finance Act NZIER Creative industries in New Zealand 12

20 4.5.3 Supplementary data The following table provides supplementary economic data and sources for the combined motion picture, radio and television services industry. Table 7: Motion picture, radio and television services supplementary data Size of market 1996 ($m) Product Total supply Exports Imports Motion picture, radio, TV services Industry linkages 1996 Supplying industry ($m) Motion picture, radio and TV services 782 Other NZ suppliers 61 Imports 50 Total supply 893 Using industry Advertising and marketing services 262 Motion picture, radio and TV services 165 Other NZ users 428 Exports 38 Total use 893 Source: Inter-Industry Study 1996, SNZ NZIER Creative industries in New Zealand 13

21 4.6 Film and video production Motion picture film or tape production Television film or tape production Discussion a) Screen production We have used the term Film and video production for consistency with ANZSIC and the UK Mapping Study. An alternative and more commonly used label in New Zealand is the Screen Production Industry. While screen production is unambiguously an output of the film industry as defined here, it is both an output and an input of the television industry, as defined above. Television broadcasters may produce programme material for broadcast or sale, or purchase local programme material from independent production houses in New Zealand. A further complication is that the local television broadcasters do not always carry the full cost of production; significant part funding is provided by foreign investors or New Zealand on Air, for example. Thus the net cost of locally produced programmes to these broadcasters understates the value of creative activity in the production sector. We have thus tried to use the SPADA data to provide a full picture of the screen production industry, but note the fact that some output of the film or screen production industry is an input into the television industry and thus nets out in GDP contribution terms. b) Revenue estimates The eighth in a series of surveys by the Screen Producers and Directors Association (SPADA) was published in November The total production financing figures shown in that survey are taken as the revenue figures for the industry. Note that there might thus be some mismatch between these and the SNZ employment data, which is for film and video production only. The last few years i.e. since 1998, have been exceptional ones for the New Zealand screen production industry because of the impact of The Lord of the Rings. For example, production financing for feature films in 2000/2001 was $308 million, compared with an average of $20 million for the five years to March The figures for the film industry and screen production in total are thus likely to fall back quite sharply in coming years Economic contribution The following table provides summary data and sources. NZIER Creative industries in New Zealand 14

22 Table 8: Screen production estimated economic contribution 1996/ / / / /01 Revenue ($m) Intermediate consumption Value added Employment Geographic units Memo items: Value added/turnover Value added/fte ($000) Notes: (1) SPADA production financing figures taken as proxy for industry revenue (2) Employment figures are full-time equivalents from SNZ, and for film and video production only. Sources: Survey of Screen Production in New Zealand 2001 prepared for Screen Producers and Directors Association of New Zealand Supplementary data See Table 7 (earlier) for supplementary economic data and sources for the combined motion picture, radio and television services industry. 4.7 Architecture Architect (own account) Architectural consultancy service Drafting service, architectural Town planning service Discussion The only primary industry data we have been able to obtain, from the New Zealand Institute of Architects is an estimate of gross fee income (approximately $150 million) per annum together with information on number of members and practice size distribution. We have calculated from that information that the NZIA may cover 2,200 2,500 people, including support people, working in architectural practices. This compares with about 4,300 full-time equivalents as recorded in the SNZ business demographics data. We have thus, somewhat arbitrarily, doubled the NZIA gross fee income number to get an industry revenue estimate Economic contribution The following table provides summary data and sources. NZIER Creative industries in New Zealand 15

23 Table 9: Architecture estimated economic contribution 1996/ / / / /01 Revenue ($m) Intermediate consumption Value added Employment Geographic units Memo items: Value added/turnover Value added/fte ($000) Notes: (1) Constant value added/turnover ratio assumed Source: NZIA/SNZ Business Patterns Supplementary data The following table provides supplementary economic data and sources for the combined industry, including engineering services. Table 10: Architecture and engineering services supplementary data Size of market 1996 ($m) Product Total supply Exports Imports Architectural and engineering services Industry linkages 1996 Supplying industry ($m) Technical services 1516 Other NZ suppliers 196 Imports 81 Total supply 1793 Using industry Electricity generation 161 Electricity transmission 89 Residential building construction 62 Wholesale trade 97 Technical services 184 Local government administration 106 Gross fixed capital formation 366 Other NZ users 671 Exports 57 Total use 1793 Source: Inter-Industry Study 1996, SNZ 4.8 Design Commercial art service NZIER Creative industries in New Zealand 16

24 Graphic design service Signwriting Ticket writing Discussion We have based our figures on a Massey University draft review (30/11/2001) of design. This refers to the consultancy industry rather than in-house design work within industry in general. The figures (Section 3.1.4) are described as billings/wages. We have assumed they are equivalent to revenue for the purpose of estimating economic contribution. The amounts for each category of design estimated in the study are set out in Appendix C. As indicated there, several of these activities would probably be undertaken in other parts of the creative sector. We have deducted these amounts (totalling $176 million) to arrive at a revenue total of $300 million for design Economic contribution The following table provides summary data and sources. Table 11: Design Estimated economic contribution 1996/ / / / /01 Revenue ($m) Intermediate consumption Value added Employment Geographic units Memo items: Value added/turnover Value added/fte ($000) Notes: (1) Massey figures adjusted for allocations to other creative industries (2) Constant value added/turnover ratio assumed Source: Massey University Design Industry Review Draft 30/11/2001. Sections and 3.1.4; Design Institute of New Zealand Designer Fashion Primary activities The UK Mapping Study describes designer fashion as covering three main activities: Clothing design Manufacture of clothes for exhibition Consultancy and diffusion line The UK Study also defines designer fashion in terms of four key sectors: 1. Couture: the original designer market dominated by French based international brands 2. International designers: a label usually dominated by one name. NZIER Creative industries in New Zealand 17

25 3. Diffusion: Designers producing high-street ranges for specific stores. 4. High fashion: Up and coming new designers, usually endorsed by celebrities. For the New Zealand designer fashion industry we have adopted the following main criteria: Firms or individuals involved in clothing; Having a primary focus on design, as distinct from manufacture of clothing. 1. We would thus include: 2. Established fashion labels 3. Lifestyle clothing 4. Niche market brands 5. Emerging new designers Data New Zealand has a number of designers operating in one or more of these sectors. However, at this stage there is no separate ANZSIC code for designer fashion, so we cannot identify employment numbers in the industry from SNZ data. The UK Mapping Study estimates that the UK Designer Fashion industry had gross sales in 1996 equal to 9% of the UK Apparel Manufacturing Industry. In New Zealand, sales from the apparel and textile industry amount to about $3 billion annually. In 1999, employment in apparel manufacture accounted for about 55% of total textile and clothing. 3 This suggests turnover in the apparel industry of about $1.6 billion. If the designer fashion proportion was 5% to 10%, this would put industry revenue in the $80 million to $160 million range. We suggest that a realistic figure for total industry revenue in 2000/01 is about $100 million per annum, with about $30 million of this comprising export revenue. We have backcast from this revenue figure on the assumption that revenue would have grown by 10% per annum between 1996/97 and 2000/01. These annual revenue figures ($68 million, $75 million, $83 million, $91 million, and $100 million) are then included in the creative sector aggregates for each year, and the intermediate consumption and value added figures adjusted accordingly Music and performing arts Primary activities Live theatrical or musical presentations (concerts, opera, ballet or drama) Sound recording studios Discussion For the purposes of estimating music industry revenue, we have drawn on the recent report The Value of the New Zealand Music Industry prepared for the New Zealand Music Industry Commission. This applies an industry definition as follows: 3 Refer Burleigh Evatt/NZIER report Textile and clothing scoping study Report to Industry New Zealand, July NZIER Creative industries in New Zealand 18

26 The activities of, or made possible by, the work of creative artists who are New Zealand residents composing or performing music. Total annual revenue generated under this definition is estimated at about $146 million. This includes government funded music education of about $30 million. We have deducted half of this amount, for consistency of approach, as it seems more properly be allocated to education. The Music Industry study incorporates the revenue generated by the NZSO and regional orchestras. Other performing arts which we need to include in our figures are ballet, opera, and drama. The 2000 Annual Report for the Royal New Zealand Ballet records revenue for that year of $7.5 million. We have assumed revenue for opera and live theatre would lift the aggregate revenue for these three to about $45 million annually, with live theatre the largest component. This is broadly consistent with household spending data (see section 6) which shows a total of $62 million (in 1995/96) being spent on theatre, ballet, concert, or play attendance Economic contribution The following table provides summary data and sources. Table 12: Music and performing arts estimated economic contribution 1996/ / / / /01 Revenue ($m) Intermediate consumption Value added Employment Geographic units Memo items: Value added/turnover Value added/fte ($000) Notes: (1) Music industry study amount adjusted for education sector activity (2) Constant value added/turnover ratio assumed Source: New Zealand Music Industry Commission SNZ Business Demographics 4.11 Visual arts and crafts Primary activities For this industry we have combined three ANZSIC categories: creative arts (visual arts such as painting, drawing, sculpture, pottery etc) Portrait and other photography and antique and used good retailing. We have summed employment numbers for the first two with an arbitrary 50% of the third to come up with industry aggregates. NZIER Creative industries in New Zealand 19

27 Discussion We have minimal primary information on this industry, apart from some data in the Massey University review of Design. We have thus taken the SNZ employment data as being the most reliable data, and applied an assumed value added/fte figure to generate the economic contribution estimate. Included in the estimated revenue figure of $168 million for the latest year are $35 million for photography and $6 million for crafts. Refer Appendix C Economic contribution The following table provides summary data and sources. Table 13: Visual arts and crafts estimated economic contribution 1996/ / / / /01 Revenue ($m) Intermediate consumption Value added Employment Geographic units Memo items: Value added/turnover Value added/fte ($000) Notes: (1) Estimates based on employment numbers (2) Constant value added/turnover ratio and value added/fte assumed Source: SNZ Business Demography NZIER Creative industries in New Zealand 20

28 4.12 Creative sector totals Economic contribution The following table shows the totals generated by summing data estimates for the 10 individual industries analysed above. Table 14: Creative industries economic contribution 1996/ / / / /01 Revenue ($m) Intermediate consumption Value added Employment Geographic units Memo items: Value added/turnover Value added/fte ($000) Total GDP Total employment Average value added/fte Creative sector shares of: Total GDP 2.6% 2.8% 3.1% 3.2% 3.1% Total employment 3.0% 3.0% 3.2% 3.4% 3.6% Notes: (1) First 5 rows sum of 10 component industry data (2) Memo items calculated Source: NZIER workbooks Contribution totals and SNZ BD Pivot 5. BENCHMARKING These fairly rough estimates put the economic contribution of the creative sector at about 3.1% of GDP and 3.6% of employment. The GDP contribution for the creative sector is comparable with that for: communication services (3.2%), central government administration and defence (3.3%), finance (3.5%), and education (3.9%). For the creative sector as a whole, the value added/fte amounts (around $73,000) are close to national averages, although there is considerable variation around the sector average. As a reality check we briefly compare this result with other sources: BERL studies of the economic contribution of copyright industries estimated value added shares of 3% in 1981/82, and 3.2% in 1986/87. 4 Allowing for some differences in coverage and some growth in the creative sectors since, our results seem broadly consistent with those. 4 Copyright Council of New Zealand (1992) The Economic Contribution of Copyright Based Industries Business and Economic Research Limited. NZIER Creative industries in New Zealand 21

29 An Australian study which shows value added and employment in Copyright Industries equivalent to 3.3% and 3.8% respectively of Australian totals. The UK study which put the creative industries there at over 5% of GDP in Note that the UK is a major global centre for such activities as advertising, design, music, publishing, and software. It is likely to be a much larger net exporter of creative services as a whole (relative to GDP) than New Zealand. This would be consistent with a GDP contribution for the UK creative sector as a whole, significantly higher in percentage terms than in New Zealand. 6. EXTERNAL TRADE 6.1 International trade in services We have been unable to gather much primary information on exports of creative goods and services, but some relevant data is included in the SNZ Census of International Trade in Services and Royalties. Table 15: External trade in selected services-$m June year 1999 Categories Exports Imports Computer services Software royalties Advertising Architectural, engineering and other Personal, cultural, and recreational services Totals Note: Net exports of engineering services are a large component of the fifth line. These are outside the creative sector as defined here. Source: Statistics New Zealand The external trade data include in our supplementary tables shows a much larger imbalance with exports of about $275 million, and imports of nearly $1200 million. However, this is for a broader range of activities, some outside the core creative sector. 6.2 Spending by tourists Some of the revenue earned by the creative industries would be from tourists both international inbound, and domestic. (Likewise, some cultural spending would be by tourists). Statistics New Zealand s Tourism Satellite Account include some data relevant to this study. Note that the term tourist is fairly broadly defined to include overseas tourist visiting New Zealand, along with the domestic travel spending of households and the employees of private business and government organisations. 5 5 Statistics New Zealand (2001) Provisional tourism satellite account , p.19 NZIER Creative industries in New Zealand 22

30 In the year ended March 1997, tourism expenditure on libraries, archives, museums and other cultural services amounted to $76 million, comprising $31 million in domestic demand, and $45 million in international demand. 7. EXPENDITURE ON CREATIVE INDUSTRIES Apparent domestic consumption is the sum of production and import, less exports. Based on the revenue estimate in Table 14 (earlier), we would put apparent domestic consumption of creative goods and services at somewhere between $7 billion and $7.5 billion per annum. We can present a partial picture of the demand side of the creative sector based on SNZ (1996) Household spending on culture, in turn derived from the Household Economic Survey (HES). This provides only a partial picture of total New Zealand consumption of the various items because: They relate only to household expenditure, so exclude cultural goods and services consumed free; HES data includes private households only; it excludes non-private households (e.g. people living in institutions); It also excludes cultural spending by non-household entities companies, local authorities, and government departments. The 10 industry categories analysed in this study are consumed by both households and non-household entities, although some e.g. film and video are predominantly final consumption items; others, such as advertising are mainly sold to businesses i.e. are part of their intermediate consumption. NZIER Creative industries in New Zealand 23

31 Summary information in the categories covered in the production analysis, is as follows: Table 16: Household expenditure on cultural goods 1995/96 Category Description $m Publishing Performing arts Visual arts Newspaper and other publishing and distribution and retailing of books and periodicals Theatre, ballet, concert or play attendance Purchase of materials, visual arts, and photographic services Film and video Cinema tickets and video hire 111 Community and government activities Adult education, cultural education and training 45 Total 783 Note: Arguably, some proportion of pay TV subscriptions should also be included Source: Statistics New Zealand Household Spending on Culture 1996 This total can be compared with the figure of $1.9 billion for all household expenditure on cultural goods (including items not shown above such as spending on television sets, recorded music, and the public broadcasting fee.). This was equivalent to 4.8 per cent of net household expenditure in 1995/ SOURCES Australian Bureau of Statistics and New Zealand Department of Statistics ANZSIC (1993) Australian Copyright Council (2001) The economic contribution of Australia s copyright industries. Report for Australian Copyright Council and Centre for Copyright Studies prepared by the Allen Consulting Group. Communications Agencies Association website ( Copyright Council of New Zealand (1997) Economic growth of copyright industries Prepared by Business and Economic Research. Copyright Council of New Zealand (1994) Copyright reform to promote cultural, economic job and export growth. Copyright Council of New Zealand (1993) Employment in copyright based industries. Prepared by Business and Economic Research. Copyright Council of New Zealand (1992) The social and economic importance of copyright. Prepared by Business and Economic Research. Copyright Council of New Zealand (1989) The economic contribution of copyright based industries in New Zealand. Prepared by Business and Economic Research. NZIER Creative industries in New Zealand 24

32 Department for Culture, Media and Sport (2001) Creative industries mapping document Industry New Zealand (2001) The New Zealand music industry: a scoping review of the contemporary music industry for Industry New Zealand. Prepared by Rocky Douche for R.P. Douche Consulting Limited. Institute of Policy Studies (2000) Funding our culture. IPS Policy Paper, number 7, 2000 Massey University (2001) Design industry review. Draft, November New Zealand Music Industry Commission (2002) The value of the New Zealand music industry. Prepared by Dialogue Consultants Limited. Screen Producers and Directors Association of New Zealand (2001) Survey of Screen Production in New Zealand Statistics New Zealand (2001) Provisional tourism satellite account , p.19 Statistics New Zealand (2001) Inter-Industry Study 1996 Statistics New Zealand Business Demographics Statistics New Zealand Census of international trade in services and royalties: year ended June Statistics New Zealand (2000) Government spending on culture Statistics New Zealand (1995) New Zealand cultural statistics Statistics New Zealand (1996) Household spending on culture NZIER Creative industries in New Zealand 25